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Biotech / Medical : VISX -- Ignore unavailable to you. Want to Upgrade?

To: capitalistbeatnik who wrote (1198)	7/8/1999 12:49:00 PM
From: Jack Jackson	Read Replies (1) \| Respond to of 1754

Stock of the Day Jul 08, 1999 Visx: Eye Carumba! Laser Eye Surgery Is Hot Laser eye surgery to correct vision disorders is spreading like wildfire. If you don't know someone who is raving about the procedure from personal experience, you can tell just by the stock performance of Visx (Nasdaq:VISX - news) which is up 700% in eight months. Visx makes excimer laser systems used to correct vision disorders such as nearsightedness, astigmatism and farsightedness. It is a 30-minute outpatient procedure that usually delivers immediate results. The number of laser vision correction procedures is expected grow from 200,000 in 1997 to 1.2 million next year. The fact that laser vision correction grew so rapidly through word of mouth makes VISX an exciting story stock, and we often hear investment experts advising to "buy what you know." Obviously millions of people have come to know about laser eye surgery, but is it myopic for investors to buy VISX after the stock price has run up so far already? As with Internet stocks, it is difficult to use valuation measures based on historical results because the laser vision correction market is so young, not to mention offering growth potential that is vast but difficult to estimate. So while VISX trades at a heart-stopping 163 times trailing 12-month earnings, earnings per share grew at more than 100% in the latest quarter and may do so for the entire year. In addition to selling the laser systems, Visx collects a $250 fee for each procedure. The total number of laser vision correction procedures grew from 200,000 in 1997 to 400,000 last year. A common industry prediction is for 800,000 in 1999 and 1.2 million in 2000, though some analysts say that is now conservative. Visx has an estimated 75% market share. How big could this market be? Approximately 145 million Americans need glasses, so the potential market for laser vision correction is thought to be in the tens of billions of dollars. So even though Visx dominates its market, with less than $200 million in sales there is plenty of room for this company to grow rapidly for a long time if laser vision correction continues on its course toward mass market adoption. The road to success for Visx still has challenges, though, including a competitive landscape that has, up to now, not been all that competitive. At present, Visx has the only system approved in the US for correcting nearsightedness, astigmatism and farsightedness, but that could change soon. Summit Technology (Nasdaq:BEAM - news) is expected to gain broadened FDA approval on its systems, and Summit plans to acquire laser system designer Autonomous Technologies which should help with technological advances going forward. Bausch & Lomb (NYSE:BOL - news) expects to introduce its own laser system later this year. Technology is the first line of battle, but competition on price is expected to become an issue, too. Already a privately held Japanese firm, Nidek, waived its per-use fee in an effort to gain market share, though its system is only approved for myopia. Visx's laser systems list for more than a half-million dollars, so unit prices are seen falling as well. As with any industry in its infancy, investors looking at companies in the laser vision correction field face a very high-risk/high-reward profile. Visx is the clear leader, but the stock market has already recognized the initial success and huge potential for laser vision correction, so the stock is not cheap. And even for investors who find VISX worth buying at its current price of $88, they'll need to stay on top of a rapidly evolving market to ensure that they're still riding the right horse. - James Hale The Online Investor --------------------------------------------------------------------------------